India - Tale of Economics

India - Tale of Economics

The economic history of India begins with the Indus Valley Civilization, whose economy appears to have depended significantly on trade and examples of overseas trade, notable being Indus-Mesopotamia relations. The Vedic period saw countable units of precious metal being used for exchange. Around 600 BC, the Mahajanapadas minted punch-marked silver coins. The period was marked by intensive trade activity and urban development. By 300 BC, the Maurya Empire had united most of the Indian subcontinent. The resulting political unity and military security allowed for a common economic system and enhanced trade and commerce, with increased agricultural productivity. The Maurya Empire was followed by classical and early medieval kingdoms, including the Cholas, Guptas, WesternGangas, Harsha, Palas, Rashtrakutas and Hoysalas.

During this period between 1 CE and 1000 CE, the Indian subcontinent is estimated to have accounted for one-third, to one-fourth of the world's population, and product. According to the Balance of Economic Power, India had the largest and most advanced economy for most of the interval between the 1st century and 18th century, the most of any region for alarge part of the last two millennia. India experienced per capita GDP growth in the high medieval era after 1000 CE, during the Delhi Sultanate in the north and Vijayanagara Empire in the south.

The Era of Decline & Collapse

During the Mughal rule India was prosperous into the early 18^th century. It is estimated that 28,000 tonnes of bullion flowed into the Indian subcontinent between 1600 and 1800, equating to 20% of the world's production in the period.An estimate of the annual income of Mughal treasury, in 1600, is £17.5 million in contrast to the tax take of Britain two hundred years later, in 1800, totalled £16 million. The South Asia region, in 1600, was estimated to be the second largest in the world, behind China's.

But in the early half of the 18th century, Mughal Empire fell into decline, with Delhi sacked in Nader Shah's invasion of the Mughal Empire, the treasury emptied, tens of thousands killed, and many thousands more carried off, with their livestock, as slaves, weakening the empire and leading to the emergence of post-Mughal states. The Mughals were replaced by the Marathas as the dominant military power in much of India, while the other smaller regional kingdoms who were mostly late Mughal tributaries, such as the Nawabs in the north and the Nizams in the south, declared autonomy. However, the efficient tax administration system was left largely intact, with revenue assessment increased to 50 percent or more, in contrast to China's 5 to 6 percent, to cover the cost of the wars.

After the decline of the Mughal Empire, Mysoreans embarked on an ambitious economic development program that established the Kingdom of Mysore as a major economic power, with some of the world's highest real wages and living standards in the late 18th century. During this period, Mysore overtook the wealthy Bengal Subah as India's dominant economic power, with highly productive agriculture and textile manufacturing. Mysore's average income was five times higher than subsistence level at the time. The Maratha Empire also managed an effective administration and tax collection policy throughout the core areas under their control and extracted chauth from vassal states.

India went through a period of deindustrialization in the latter half of the 18th century as an indirect outcome of the collapse of the Mughal Empire, and that British rule later caused further deindustrialization. According to Williamson, the Mughal Empire's decline reduced agricultural productivity, which drove up food prices, then nominal wages, and then textile prices, which cost India textile market share to Britain even before the latter developed factory technology, though Indian textiles maintained a competitive advantage over British textiles until the 19th century. 

British East India - The Looting

The British East India Company conquered Bengal Subah at the Battle of Plassey in 1757. After gaining the right to collect revenue in Bengal in 1765, the East India Company largely ceased importing gold and silver, which it had hitherto used to pay for goods shipped back to Britain.

In addition, as under Mughal rule, land revenue collected in the Bengal Presidency helped finance the Company's wars in other parts of India. Consequently, in the period 1760–1800, Bengal's money supply was greatly diminished. The closing of some local mints and close supervision of the rest, the fixing of exchange rates and the standardization of coinage added to the economic downturn.

During the period 1780–1860 India changed from an exporter of processed goods paid for in bullion to an exporter of raw materials and a buyer of manufactured goods. In the 1750s fine cotton and silk was exported from India to markets in Europe, Asia, and Africa, while by the second quarter of the 19th century, raw materials, which chiefly consisted of raw cotton, opium, and indigo, accounted for most of India's exports. From the late 18th century the British cotton mill industry began to lobby their government to tax Indian imports and allow them access to markets in India. Starting in the 1830s, British textiles began to appear in—and then inundate—Indian markets, with the value of the textile imports growing from £5.2 million in 1850 to £18.4 million in 1896. The abolition of slavery encouraged Caribbean plantations to organize the import of South Asian labour.

The British subjugated vast land through the power of their artillery and the cynicism of their amorality. They displaced nawabs and maharajas for a price, emptied their treasuries as it pleased them, took over their states through various methods including, from the 1840s, the cynical ‘doctrine of lapse’ whenever a ruler died without an heir and stripped farmers of their ownership of the lands they had tilled for generations.

With the absorption of each native state, the Company official John Sullivan also known as the founder of the ‘hill-station’ of Ootacamund, or ‘Ooty’, observed in the 1840s, ‘The little court disappears, trade languishes, the capital decays, the people are impoverished, the Englishman flourishes, and acts like a sponge, drawing up riches from the banks of the Ganges, and squeezing them down upon the banks of the Thames.’ The India that the British East India Company conquered was no primitive or barren land, but the glittering jewel of the medieval world. Its accomplishments and prosperity the wealth created by vast and varied industries.

Economic impact of imperialism

Debate about the economic impact of British imperialism on India was first raised by Edmund Burke who in the 1780s vehemently attacked the East India Company, claiming that Warren Hastings and other top officials had ruined the Indian economy and society. The British rule in the 18th century took the form of plunder and was a catastrophe for the traditional economy. According to the economic drain theory the British depleted food, and money stocks and imposed high taxes that helped cause the terrible famine of 1770, which killed a third of the people of Bengal.

British control was delegated largely through regional rulers and was sustained by a generally prosperous economy through the 18th century, except for the frequent, deadly famines. British raised revenue through local tax administrators and kept the old Mughal tax rates.

British colonial rule created an institutional environment that stabilized Indian society, while they stifled trade with the rest of the world. They created a well-developed system of railways, telegraphs and a modern legal system. This infrastructure was mainly geared towards the exploitation of resources, leaving industrial development stalled and agriculture unable to feed a rapidly accelerating population. Indians were subject to frequent famines, had one of the world's lowest life expectancies, suffered from pervasive malnutrition and were largely illiterate.

Republic of India - Socialist reforms (1950–1990)

The Republic of India, founded in 1947, adopted central planning for most of its independent history, with extensive public ownership, regulation, red tape and trade barriers. It adopted a socialism-inspired economic model with elements of capitalism. India adopted a USSR-like centralized and nationalized approach called Five-Year Plans. This policy resulted in forming bedrock of post-colonial Indian economy. Before independence a large share of tax revenue was generated by the land tax. Thereafter land taxes steadily declined as a share of revenues.

The economic problems inherited at independence were exacerbated by the costs associated with the partition, which had resulted in about 2 to 4 million refugees fleeing past each other across the new borders between India and Pakistan. Refugee settlement was a considerable economic strain. Partition divided India into complementary economic zones. Under the British, jute and cotton were grown in the eastern part of Bengal (East Pakistan, after 1971, Bangladesh), but processing took place mostly in the western part of Bengal, which became the Indian state of West Bengal. As a result, after independence India had to convert land previously used for food production to cultivate cotton and jute. Growth continued in the 1950s, the rate of growth was less positive than India's politicians expected. Toward the end of Nehru's term as prime minister, India experienced serious food shortages.

Beginning in 1950, India faced trade deficits that increased in the 1960s. The Government of India had a major budget deficit and therefore could not borrow money internationally or privately. As a result, the government issued bonds to the Reserve Bank of India, which increased the money supply, leading to inflation. The Indo-Pakistani War of 1965 led the US and other countries friendly towards Pakistan to withdraw foreign aid to India, which necessitated devaluation. India was told it had to liberalise trade before aid would resume. The response was the politically unpopular step of devaluation ccompanied by liberalisation. Defence spending in 1965/1966 was 24.06% of expenditure, the highest in the period from 1965 to 1989. Exacerbated by the drought of 1965/1966, the devaluation was severe. GDP per capita grew 33% in the 1960s, reaching a peak growth of 142% in the 1970s, before decelerating to 41% in the 1980s and 20% in the 1990s. From FY 1951 to FY 1979, the economy grew at an average rate of about 3.1 percent a year, or at an annual rate of 1.0 percent per capita. During this period, industry grew at an average rate of 4.5 percent a year, compared with 3.0 percent for agriculture.

Economic liberalisation in India

Economic liberalisation in India was initiated in 1991 by Prime Minister P. V. Narasimha Rao and his then-Finance Minister Dr. Manmohan Singh. Rao was often referred to as Chanakya for his ability to steer tough economic and political legislation through the parliament at a time when he headed a minority government. Rao assumed office as PM and with Manmohan Singh as FM took the Critical decisions within one month. Exchange rate adjustments were announced, gold from the reserve assets of Reserve Bank of India (RBI), to raise $400 million, was shipped out soon thereafter. Two months later the statement on industrial policy announced dramatic changes while the Union budget presented to Parliament announced far-reaching decisions, way beyond the remit of conventional budgets. When Rao lost the election, the new Prime Minister , Atal Bihari Vajpayee administration surprised many by continuing reforms, while at the helm of affairs of India for six years, from 1998–2004. The BJP-led National Democratic Alliance Coalition began privatising under-performing government-owned business including hotels, VSNL, Maruti Suzuki, and airports, and began reduction of taxes, an overall fiscal policy aimed at reducing deficits and debts and increased initiatives for public works.

Economic liberalisation led to large economic changes and the Indian steel industry began expanding into Europe in the 21st century. In January 2007 India's Tata bought European steel maker Corus Group for $11.3 billion. In 2006 Mittal Steel (based in London but with Indian management) acquired Arcelor for $34.3 billion to become the world's biggest steel maker, Arcelor Mittal, with 10% of world output. The GDP of India in 2007 was estimated at about 8 percent that of the US. The government started the Golden Quadrilateral road network connecting Delhi, Chennai, Mumbai and Kolkata with various Indian regions. The project, completed in January 2012, was the most ambitious infrastructure project of independent India. 

However in 2004 , Bajpayee lost to  Dr Manmohan Singh who became the new Prime Minister in coalition government of The United Front. His government attempted a progressive budget that encouraged reforms, but the 1997 Asian financial crisis and political instability created economic Stagnation. Towards the end of 2011, the Congress-led UPA-2 Coalition Government initiated the introduction of 51% Foreign Direct Investment in retail sector. But due to pressure from fellow coalition parties and the opposition, the decision was rolled back. However, it was approved in December 2012.

The Resurgent India

In 2014 Narendra Modi took the charge as Prime Minister with massive mandate and unleashed another round of reforms. In the early months of 2015, Narendra Modi further opened up the insurance sector by allowing up to 49% FDI. This came seven years after the previous government attempted and failed to push through the same reforms and 16 years after the sector was first opened to foreign investors up to 26% under the under Atal Bihari Vajpayee's administration. The Modi Government also opened up the coal industry through the passing of the Coal Mines (Special Provisions) Bill of 2015. It effectively ended the Indian central government's monopoly over the mining of coal, which existed since nationalization in 1973 through socialist controls. It opened up the path for private, foreign investments in the sector, since Indian arms of foreign companies are entitled to bid for coal blocks and licences, as well as for commercial mining of coal. This resulted in billions of dollars’ investments by domestic and foreign miners. In the 2016 budget session of Parliament, the Narendra Modi led BJP Government pushed through the Insolvency and Bankruptcy Code. The Code creates time-bound processes for insolvency resolution of companies and individuals. These processes will be completed within 180 days. If insolvency cannot be resolved, the assets of the borrowers may be sold to repay creditors. This law drastically eases the process of doing business, according to experts and is considered by many to be the second most important reform in India since 1991 next to the proposed GST.

On July 1, 2017, the BJP-led NDA Government under Narendra Modi approved the Act to Uniform Goods and Services Tax (India). It was approved 17 years after the legislation was first proposed under the earlier BJP-led NDA Government under Atal Bihari Vajpayee's administration in 2000. Touted to be India's biggest tax reform in 70 years of independence and the most important overall reform in terms of ease of doing business since 1991. GST replaced a slew of indirect taxes with a unified tax structure and was therefore showcased as dramatically reshaping the country's 2.5 trillion-dollar economy. Subsequently the government recapitalised NPA-hit public sector banks (PSBs) with massive Rs 2.11-lakh crore two-year road map to strengthen, which includes recapitalisation bonds, budgetary support and equity dilution. In the last three-and-a-half years, the government has pumped in more than Rs 51,000 crore capital in public sector banks. The Government introduced Real Estate Regulation and Development Act and gave its nod for an increase in the carpet area of the affordable houses eligible for interest subsidy under the Credit Linked Subsidy Scheme (CLSS) for the Middle Income Group (MIG) under the Pradhan Mantri Awas Yojana (Urban). Intensifying its crackdown on black money, the government has collated information about 5,800 shell companies who’s near zero-balance accounts saw nearly Rs 4,574 crore of deposits post note ban and Rs 4,552 crore withdrawal thereafter. Vital information has been received from 13 banks regarding the bank account operations and post-demonetisation transactions of some of the 2,09,032 suspicious companies that had been struck off the Register of Companies earlier this year.

Today after its seventh decade of independence, India stands on the cusp of major change: a transformation that could lead to unprecedented economic growth paired with radical improvements in the nation’s Human Development Index (HDI). Over the past two decades, India’s gross domestic product (GDP) has risen by more than US$1tr and India is poised to increase its GDP by 9% per year to become a US$10tr economy over the coming two decades.

A consistent GDP growth rate with a per capita income rising will boost quality of life for more than 1.25bn citizens. This would be the largest national development effort any democracy has ever attempted. Reaching this goal will call for a concerted effort—from businesses, entrepreneurs, investors, and government leaders. Today the Young India is driven by the belief that India can build shared prosperity for its 1.25 billion citizens by transforming the way the economy creates value. Corporate India has a critical role to play in this story, not only by creating value by addressing key societal needs, but in supporting a vibrant entrepreneurial sector.

Article 370: Law and politics

 Article 370: Law and politics 

Article 370 of the Indian constitution gave special status to Jammu and Kashmir and a part of the larger region of Kashmir, which has been the subject of dispute between India, Pakistan, and China since 1947 allowing it to have a separate constitution, a state flag and autonomy over the internal administration of the state. 

The article was drafted in Part XXI of the Constitution :Temporary, Transitional and Special Provisions. The Constituent Assembly of Jammu and Kashmir, after its establishment, was empowered to recommend the articles of the Indian constitution that should be applied to the state or to abrogate the Article 370 altogether. After consultation with the state's Constituent Assembly, the 1954 Presidential Order was issued, specifying the articles of the Indian constitution that applied to the state. Since the Constituent Assembly dissolved itself without recommending the abrogation of Article 370, the article was deemed to have become a permanent feature of the Indian Constitution.

This article, along with Article 35A, defined that the Jammu and Kashmir state's residents live under a separate set of laws, including those related to citizenship, ownership of property, and fundamental rights, as compared to resident of other Indian states. As a result of this provision, Indian citizens from other states could not purchase land or property in Jammu & Kashmir.

On 5 August 2019, President Ram Nath Kovind issued a constitutional order superseding the 1954 order, and making all the provisions of the

Indian constitution applicable to Jammu and Kashmir. On 5 August 2019, the Home Minister Amit Shah introduced the Jammu and Kashmir Reorganisation Bill, 2019 in the Rajya Sabha to convert Jammu and Kashmir's status of a state to two separate union territories, namely Union Territory of Jammu and Kashmir and Union Territory of Ladakh. The union territory of Jammu and Kashmir is proposed to have a legislature under the bill whereas the union territory of Ladakh is proposed to not have one. By the end of the day, the bill was passed by Rajya Sabha with 125 votes in its favour and 61 against (67%). The next day, the bill was passed by the Lok Sabha with 370 votes in its favour and 70 against it (84%). The bill became an Act after it was signed by the President.

The two union territories will come into existence on 31 October 2019, which is birthday of Sardar Patel, who unified all the princely states except Jammu and Kashmir (princely state) in independent India.

The suzerainty of the British Crown over the Princely States

Prior to partition in 1947, British rule over India comprised two separate categories of geographical regions. One comprised various provinces administered by the Viceroy of India and the other comprised provinces ruled by Maharajas, Princes, Nawabs, etc. There were 565 princely states existed in India during the period of British rule. These were not parts of British India proper, having never become possessions of the British Crown, but were tied to it in a system of subsidiary alliances. All of these were collectively designated as "Indian States”. For these states the British looked after the areas of defence, foreign policy and communications while they were allowed governance in internal matters such as law and order, civil liberties, health, education and economic development. The state of J&K was one of them.

The Government of India Act 1935 introduced the concept of the Instrument of Accession, wherein a ruler of a princely state could accede his kingdom into the 'Federation of India'. The federation concept was initially opposed by the Indian princes, but accession of all the princely states was almost complete when World War II occurred. In 1947 the British finalised their plans for quitting India, and the question of the future of the princely states was a conundrum for them. As they were not British, they could not be partitioned by the British between the new sovereign nations of India and Pakistan. The Indian Independence Act 1947 provided that the suzerainty of the British Crown over the princely states would simply be terminated, effective 15 August 1947.

On 20 February 1947, His Majesty's Government announced that British India would become independent. Facing the state’s rulers on 11 July that year, Lord Mountbatten, the Viceroy, said: “The Indian Independence Act releases the states on 15 August from all their obligations to the Crown. The states have complete freedom - technically and legally they are independent’. At a meeting held on 25 July 1947, Mountbatten advised the princes that they should accede to one of the two dominions, keeping in mind the ‘geographical contiguity of their states’, while surrendering power over three specified subjects, without any financial liability.

By 14 August,1947 most states had signed the instrument of accession (IoA) – either with Pakistan or India and the era of the princely states effectively ended with Indian independence in 1947. The accession process was largely peaceful, except in the cases of Jammu and Kashmir which opted for independence but decided to accede to India following an invasion by Pakistan-based forces.

The Crisis of Jammu & Kashmir

On 12 August 1947 the Maharaja of Jammu & Kashmir proposed a Standstill Agreement with India and Pakistan on matters, pending his final decision regarding the future of the state. Pakistan accepted this while India asked the Maharaja to send its representative for discussions. The Pakistan government then started putting pressure on the Maharaja to join Pakistan. It also started an economic blockade from Pakistan, while the government was pleading special reasons for its inability to supply Kashmir with essential commodities, The Muslim League’s official organ The Dawn, wrote on 24 August 1947, -The time has come to tell the Maharaja of Kashmir that he must make his choice and choose Pakistan”. Should Kashmir fail to join Pakistan, “the gravest possible trouble would inevitably ensure.” Pakistan had made its intent clear.

Twice, in September 1947, the Maharaja offered accession to India on the condition that his reservations with respect to Sheikh Abdullah – then under arrest be respected. On both occasions, Jawaharlal Nehru insisted that Abdullah be released to head a popular government. As Hari Singh did not accept Abdullah the initiative proved abortive. The reason to his dislike was that Abdullah had launched the ‘Quit Kashmir Movement’ against Dogra rule and was tried for treason and jailed for nine years on 20 May 1946. As a lawyer, Nehru wanted to represent Abdullah but was stopped as he crossed into the state at Kohala. On account of Nehru’s friendship with Abdullah the Maharaja did not trust Nehru.

On the fateful night of 21/22 October,1947 some 5,000 Pathan tribesmen invaded the state; looting, killing and raping along the way. The Maharaja wanted the Indian Army to drive out the invaders for which he needed to sign the IOA. This he did on 26 October 1947 which was accepted the very next day by India’s Governor General, Lord Mountbatten. Subsequent to Accession, Lord Mountbatten wrote a personal letter to the Maharaja saying “it is my government’s wish that, as soon as law and order is restored in Kashmir and its soil cleared of the invader, the question of the state’s accession should be settled by a reference to the people.” However, Pakistan refused to recognise this accession.

In the early hours of 27 October 1947, India began an operation.By 7 November,1947 Indian troops won the battle of Shaltang, thereby removing all threats to Srinagar. Three days later, Baramulla was recaptured. The process of retreat by the enemy on all fronts began. The Indian Army soon realised that the only way to completely remove the raiders was by attacking their bases and sources of supply in Pakistan. On 22 December 1947, India warned Pakistan that unless Pakistan denied her assistance and bases to the invaders, India would be compelled to take such action.

At that critical stage, Lord Mountbatten urged Nehru about “the overwhelming need for caution and restraint”. He stressed that “embroilment in war with Pakistan would undermine the whole of Nehru’s independent foreign policy and progressive social aspirations.” On Mountbatten’s advice, Nehru decided to lodge a complaint to the United Nations Security Council. That was done on 1 January 1949.

On 5 January 1949, the UN Commission for India and Pakistan proposed a resolution whereby the future of J&K would be determined by a democratic method of a plebiscite conducted by India under the UN’s auspices but after Pakistan withdrew its troops from the state and disbanded its Azad Kashmir forces. India declared a ceasefire on 1 January and areas occupied by Pakistan were not recovered resulting in creation of Pak Occupied Kashmir (PoK)

Framing of Article 370

Article 370 was worked out in late 1947 between Sheikh Abdullah, who had by then been appointed Prime Minister of J&K by the Maharaja and Nehru, who kept the Kashmir portfolio with himself and kept Sardar Patel, the home minister, away from his legitimate function. 

While it was Mountbatten who persuaded Nehru to take the J&K issue to the UN, it was Sheikh Abdullah, who, driven by his ambition to be ruler of an independent Kashmir and his hatred for the Maharaja, persuaded Nehru to give special status to J&K. Among his reasons were- occupation of one third of J&K by Pakistan, reference to the UN and plebiscite. The most sinister aspect of proposed Article 370 was the provision that any changes could be brought about in it only by the concurrence of J&K assembly.

Nehru’s promise that Article 370 was a temporary provision and will get eroded over a period of time has turned out to be a chimera. The first thing that Sheikh Abdullah got done was to abolish hereditary monarchy and re-designate him as Sadar-e-Riyasat who was to be elected by the Assembly. The accession of J&K State into Indian Union was approved by J&K Assembly only in 1956. 

This was in tune with Sheikh Abdullah’s long ambition. On 30 October 1947, The Maharaja had issued an order appointing Sheikh Abdullah as the Head of the Emergency Administration. The National Conference leaders rejected the model and wanted power to be transferred to them without any reservations. On 2 December 1947, Nehru wrote to Maharaja Hari Singh asking that Sheikh Abdullah be appointed as the Prime Minister of J&K and he should be asked to form the government.

On 5 March 1948, the Maharaja appointed an Interim Government with the Sheikh as Prime Minister.

Negotiations were held on May 15 and 16, 1949 at Vallabhbhai Patel's residence in New Delhi on Kashmir's future set-up. Nehru and Abdullah were present. Foremost among the topics were "the framing of a Constitution for the State" and "the subjects in respect of which the State should accede to the Union of India." On the first, on May 18,1949  ,Nehru recorded in a letter to the Sheikh that both Patel and he agreed that it was a matter for the State's Constituent Assembly. On June 16, 1949, Sheikh Abdullah, Mirza Mammad Afzal Beg, Maulana Mohammed Saeed Masoodi and Moti Ram Bagda joined the Constituent Assembly of India.

Article 370 embodied six special provisions for Jammu and Kashmir. It exempted the State from the provisions of the Constitution providing for the governance of the States. Jammu and Kashmir was allowed to have its own Constitution within the Indian Union.

Second, Parliament's legislative power over the State was restricted to three subjects - defence, external affairs and communications. The President could extend to it other provisions of the Constitution to provide a constitutional framework if they related to the matters specified in the Instrument of Accession. For this, only consultation with the State government was required since the State had already accepted them by the Instrument. But, third, if other constitutional provisions or other Union powers were to be extended to Kashmir, the prior concurrence of the State government was required. The fourth feature is that that concurrence was provisional. It had to be ratified by the State's Constituent Assembly. Article 370(2) says clearly: "If the concurrence of the Government of the State... be given before the Constituent Assembly for the purpose of framing the Constitution of the State is convened, it shall be placed before such Assembly for such decision as it may take thereon."

The fifth feature is that the State government's authority to give the concurrence lasts only till the State's Constituent Assembly is "convened". It was an "interim" power. Once the Constituent Assembly met, the State government could not give its own "concurrence". Still less, after the Assembly met and dispersed.

Moreover, the President cannot exercise his power to extend the Indian Constitution to Kashmir indefinitely. The power has to stop at the point the State's Constituent Assembly drafted the State's Constitution and decided finally what additional subjects to confer on the Union, and what other provisions of the Constitution of India it should get extended to the State, rather than having their counterparts embodied in the State Constitution itself. Once the State's Constituent Assembly had finalised the scheme and dispersed, the President's extending powers ended completely.

The sixth special feature, the last step in the process, is that Article 370(3) empowers the President to make an Order abrogating or amending it. But for this also "the recommendation" of the State's Constituent Assembly "shall be necessary before the President issues such a notification".

Article 370 –An impediment

The ruler of Jammu and Kashmir acceded to India by an Instrument of Accession like all other Princely states of India. All the princely states were invited to send representatives to India's Constituent Assembly, which was formulating a constitution for the whole of India. They were also encouraged to set up constituent assemblies for their own states. Most states were unable to set up assemblies in time, but a few states did, in particular Saurashtra nion, Travancore,Cochin and Mysore. Even though the States Department developed a model constitution for the states, in May 1949, the rulers and chief ministers of all the states met and agreed that separate constitutions for the states were not necessary. They accepted the Constitution of India as their own constitution. The states that did elect constituent assemblies suggested a few amendments which were accepted. The position of all the states (or unions of states) thus became equivalent to that of regular Indian provinces. In particular, this meant that the subjects available for legislation by the central and state governments was uniform across India.

In the case of Jammu and Kashmir, the representatives to the Constituent Assembly requested that only those provisions of the Indian Constitution that corresponded to the original Instrument of Accession should be applied to the State. Accordingly, the Article 370 was incorporated into the Indian Constitution, which stipulated that the other articles of the Constitution that gave powers to the Central Government would be applied to Jammu and Kashmir only with the concurrence of the State's constituent assembly. This was a "temporary provision" in that its applicability was intended to last till the formulation and adoption of the State's constitution. However, the State's constituent assembly dissolved itself on 25 January 1957 without recommending either abrogation or amendment of the Article 370.

Article 370 has been the biggest impediment to integration of J&K State into Indian Union. That it was incorporated in the Indian Constitution by the machination of two individuals – Sheikh Abdullah and Nehru is all the more regrettable. Though Nehru had to eat the humble pie when he had to arrest the Sheikh for his divisive and anti-national stance on 8 Aug 1953 but he did not let go of his concept of keeping J&K a separate entity. In 1957, some top leaders of National Conference led by Mr Qasim split the party and formed a group called Democratic National Conference (DNC). 

Why is Article 370 detrimental to the full integration of J&K state into Indian Union. Firstly, the Central Govt can make laws only with concurrence of the State govt, practically giving it the Veto power. Article 352 and 360 for declaration of national and financial emergency respectively cannot be applied in Kashmir. While a citizen of India has only Indian citizenship, J&K citizens have two citizenships. Anti-Defection Law is not applicable to J&K. No outsider can buy property in J&K state. The beneficial laws such as Wealth Tax, Gift Tax & Urban Land Ceiling Act and intermarriage with other Indian nationals do not operate in J&K State. Even Article 356 under which President of India can impose his rule in any state cannot be enforced in J&K without consent of the Governor who himself is an appointee of the President. State of J&K can refuse building of any cantonment on any site or refuse to allot land for defence purposes.

In a recent interview to a TV channel, Prime Minister Narendra Modi stated that Article 35A and 370 held back development in Jammu & Kashmir "There must be investment and job opportunities in Jammu and Kashmir. Article 35A, 370 have been standing in the way of development. No one goes there to invest. We can build IIMs, but professors are not ready to go there as their children don't get admission in schools. They can't find homes. This ends up harming the interests of J&K. Pandit Nehru's policies stand as an obstacle for J&K today. It needs to be reviewed," the Prime Minister said.

It is often forgotten that J&K state is not a homogeneous entity. Apart from Valley Muslims, Jammu has a predominantly Hindu population while Ladakh has a mix of Buddhist and Muslims. Then we have the Gujjars & Bakarwals. The crisis of J&K has remained only in valley and is untouched at Jammu and Ladhak regions.

But when some vested interests raise an outcry that legitimate rights of Kashmiris are being trampled upon with the stated agenda of National Conference to return to pre 1953 status, the question remains as why should a state of Indian Union have a special status? It conveyed a wrong signal not only to Kashmiris but also to the separatists, Pakistan and indeed the international community that J&K is still to become integral part of India , that makes abrogation of Article 370 an imperative.

Kashmir is not the valley alone, it encompasses vast land inhabited by follower of all faiths and has been an important centre of Hinduism , of Buddhism and Sufism and deeply connected with soul of India. Its integration is towards making of one land , one law , one nation.

It is Time for Action, not Restraint

There is a time for restraint and there is a time for action. This is a time for action, not restraint.

A troop-carrying vehicle in a CRPF convoy was attacked by a car-borne suicide bomber belonging to the Pakistan army and ISI-sponsored Jaish-e-Mohammad near Letipura, Pulwama, in the Kashmir valley on February 14, 2019. Approximately 40 CRPF personnel were killed and many others were seriously injured.

The attack near Pulwama is a point on a continuum: A low-intensity limited war on the Line of Control since 1947-1948 and a three-decade-old proxy war to bleed India through a thousand cuts through State-sponsored terrorists and support for disaffected elements in the Kashmir valley.

How should India respond to this grave provocation that is unquestionably beyond India's threshold of tolerance?

The response will be guided by an assessment of the situation, the aim to be achieved, options available and the likely reaction of the Pakistani Deep State, its allies and the rest of the international community.

It is clear as daylight that Pakistan's quest to destabilise India and keep the pot boiling in Kashmir will not change. India's response should be swift, but with long-term objectives, multi-disciplinary in approach, comprising military and non-military, overt and covert actions and carefully calculated to avoid untoward military escalation.

The Cabinet Security on Security met on the morning of February 15th and took stock of the situation. The armed forces have been given a free hand to formulate appropriate retaliation strategies.

The government has decided to isolate Pakistan internationally as a State sponsor of terrorism and, as a first step, announced the withdrawal of 'most favoured nation' status accorded to Pakistan.

It is necessary to formulate a comprehensive long-term national-level strategy to counter Pakistan's proxy war. The political aim should be to raise the cost for Pakistan's Deep State to wage its proxy war with a view to eventually making the cost prohibitive.

The aim of Indian diplomacy should be to isolate Pakistan in the international community and work towards having the country branded as a terrorist State by the UN security council. India should take the first step in this regard and make a declaration to this effect.

If necessary, India should withdraw its high commissioner from Islamabad and scale down the size of its mission. Other measures, including those pertaining to a review of the Indus Waters Treaty, must also be considered.

The aim of measures in the economic field should be to choke Pakistan's economy, which is the nearly bankrupt Pakistani State's weakest element. The imposition of unilateral economic sanctions is a measure that India could consider especially if the UN security council fails to impose such sanctions at India's request.

India could also use its buyer's clout with defence MNCs to ensure that companies that sell weapons and defence equipment to India refrain from doing business with Pakistan.

The military aim should be to inflict punishment on the Pakistan army deployed on the LoC for every act of terrorism on Indian soil for which there is credible evidence of its involvement or the involvement of its organs such as the ISI.

For each subsequent act of terrorism, the scale and the intensity of the dose should be increased by an order of magnitude.

Military operations designed to inflict punishment should include artillery strikes with guns firing in the 'pistol gun' mode to destroy bunkers on forward posts with minimum collateral damage; stand-off PGM strikes on brigade and battalion HQ, communications centres, logistics infrastructure, ammunition dumps and key bridges; and, raids by Special Forces and border action teams.

Every Pakistani post through which infiltration takes place should be reduced to rubble by artillery fire.

The use of air strikes, particularly those with precision-guided missiles launched from stand-off range on the Indian side of the LoC, on terrorist training camps and infrastructure in POK, is also a viable military option.

Counter-proxy war operations should be supplemented by covert operations. Since the remaining roots of militancy are now in Pakistan and Pakistan occupied Kashmir and Pakistan is not inclined to bring to justice the leaders of terrorist organisations like the Lashkar e Tayiba and the Jaish e Mohammed, terrorists whom they call 'strategic assets', they must be neutralised through covert operations.

When the Pakistan army begins to hurt and bleed, gradually the Deep State will realise the futility of its nefarious designs on India.

While Pakistan may not give up its claims on Jammu and Kashmir, it will be forced to come to the negotiating table to discuss a long-term solution to the dispute through peaceful means.

In the wake of the Pulwama suicide bombing, India stands united as a nation; its political parties stand together. India has the support of almost the entire international community as the world is tired of the crippling impact of fundamentalist terrorism.

As envisaged by Brigadier Gurmeet Kanwal (retd) is a former Director, Centre for Land Warfare Studies (CLAWS), New Delhi.